Here's What This 178%-Gainer Has Been Buying

Every quarter, many money managers have to disclose what they've bought and sold via "13F" filings. Their latest moves can shine a bright light on smart stock picks.

Today let's look at Barrow, Hanley, Mewhinney & Strauss, one of the biggest value-focused institutional investment companies around. According to the folks at GuruFocus.com, over the 15 years ending in 2011, Barrow, Hanley racked up a cumulative gain of 178%, compared with just 124% for the S&P 500.

The company aims to invest through portfolios that maintain below-average price-to-earnings ratios, below-average price-to-book ratios, and above-market-average dividend yields. It also tends to focus on large-cap companies.

The company's reportable stock portfolio totaled $48.1 billion in value as of June 30, 2012. Its top three holdings, representing a total of almost 10% of the portfolio, were Philip Morris International, American Express, and Pfizer.

Interesting developments
So what does Barrow Hanley's latest quarterly 13F filing tell us? Here are a few interesting details:

New holdings include Phillips 66 (NYSE: PSX  ) , the recently spun-off downstream business of ConocoPhillips. It's the nation's largest independent oil refiner, and its stock recently hit a 52-week high, getting a boost from falling oil prices that swell its profit margins. It also initiated a dividend, recently yielding about 2%.

Among holdings in which Barrow Hanley increased its stake were New York Community Bancorp (NYSE: NYB  ) and Seadrill (NYSE: SDRL  ) . New York Community Bancorp does have an appealing 7.7% dividend yield and seemingly low valuation, but the company isn't expected to grow very rapidly. Deepwater rig specialist Seadrill also sports a hefty dividend, recently above 8%. Bulls like its strong performance (it recently received a multi-billion commitment from a major oil company), but some worry about its significant debt load and the possibility of a glut of deepwater rigs depressing prices eventually. Falling prices for oil can also decrease enthusiasm for offshore drilling.

Barrow Hanley reduced its stake in a handful of companies, including semiconductor fabrication equipment supplier Applied Materials (Nasdaq: AMAT  ) . Bulls like its dividend above 3%, which it has been increasing regularly. The company is also planning to buy back billions of dollars of its own shares, boosting the value of remaining shares. Bears worry that the chip industry isn't yet in a strong rebound phase, pointing to companies such as Intel lowering their outlook for the rest of the year. Even Applied Materials lowered its outlook.

Finally, Barrow Hanley unloaded several companies, such as R.R. Donnelly (Nasdaq: RRD  ) , which provides labels, packaging, and more to the private and public sector. Its fan base has been shrinking recently, with credit-rater Fitch downgrading its outlook for the debt-heavy company to negative and investors worrying that the dividend may be unsustainable. The company recently reported a rise in earnings, but a 3% decline in revenue.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.

There's big money to be made in the semiconductor world, but you need to be an informed investor. Intel has attracted many investors with its solid growth prospects and significant dividend. Check out our brand-new research report on it, assessing its opportunities and risks.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Intel, American Express, and Seadrill, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Intel and Seadrill. Motley Fool newsletter services have recommended buying shares of Seadrill and Intel, as well as writing a covered strangle position on American Express. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (1) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 14, 2012, at 10:25 PM, Hohum777 wrote:

    Now a lot of folks seem to be drifting towards PSX- I read elsewhere that Berkshire Hathaway started a PSX position in Q2

Add your comment.

DocumentId: 1984100, ~/Articles/ArticleHandler.aspx, 4/18/2014 12:00:31 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement